Sears Holdings Corp CEO Eddie Lampert’s hedge fund in a regulatory filing called on Sears’ board to sell $1.5 billion more in real estate and restructure $1.1 billion in debt in order to stave off a bankruptcy filing.
Under the plan, Sears’ $5.6 billion debt burden would be slashed by almost four-fifths. Creditors would swap $1.1 billion worth of their debt holdings for equity stakes. Further disposals, including Sears’ home services and replacement parts businesses, are expected to reduce another $1.75 billion in debt.
ESL emphasized the need for urgent action by the board, and said “Sears must act immediately to have sufficient runway to continue its transformation.” If it does not, the alternatives could “reduce, if not completely eliminate, value for stakeholders,” according to the filing.
Lampert and his fund, ESL Investments Inc., are the company’s two largest shareholders of Sears.
Sears said it has referred Lampert’s proposal to a special committee. In an internal message seen by Reuters, Sears said, “We will now be working aggressively to execute liability management transactions so that we can extend our runway and continue executing on our transformation strategy.”
To stem losses, Sears has closed hundreds of stores since last year and tried to sell assets. Lampert earlier this year urged the company to sell its Kenmore appliances brand, home improvement businesses and real estate. ESL plans to bid on any sale.
Sears recently acknowledged there is “substantial doubt” about its ability to “continue as a going concern.” It faces a loan repayment in October.